VMware CEO Aims for 90 Percent Server Virtualization

VMware has been one of the primary vendors leading the move to server virtualization and the cloud. It's a move that paid off well in 2012.

VMware reported its fourth quarter and full year fiscal 2012 financial results on Monday. For the fourth quarter, VMware reported revenue of $1.29 billion, for a 22 percent year-over-year gain. VMware's full year revenues also rose by 22 percent, coming in at $4.61 billion. Net Income for the fourth quarter was reported at $206 million and for the full year at $746 million.

Looking forward, VMware provided 2013 full year guidance for revenues to be in the range of $5.23 billion to $5.35 billion, representing expected growth of between approximately 14 percent to 16 percent over 2012.

During VMware's earnings call, CEO Pat Gelsinger was asked about his expectations for growth in server virtualization workloads. Gelsinger noted that today there is a range of estimates ranging from 50 to 60 percent on virtual workload penetration.

"Our expectation is we can continue to drive that number and we do see that we can take it to 90 percent plus," Gelsinger said. "So even in core virtualization, we believe we’re far from done."

Gelsinger added that he sees core server virtualization as a springboard for VMware's Software-Defined Data Center (SDDC) vision. The Software-Defined Data Center vision was first articulated by VMware CTO Steve Herrod in May of 2012. It's a vision that includes core server, networking, storage and cloud technologies all abstracted from the underlying hardware.

"We see a tremendous market opportunity in 2013 and beyond as we focus on what our customers value most, VMware’s role as a pioneer of virtualization technologies that simplify IT infrastructure from the datacenter to the virtual workspace," Gelsinger said.

From a product perspective, VMware's vCloud Suite became available in the fourth quarter of 2012.

"The vCloud Suite integrates VMware’s leading virtualization, availability, networking, security and management portfolio into a single SKU and simplifies customers' adoption of cloud technologies," Carl Eschenbach, President and Chief Operating Officer of VMware, said during the call.

The vCloud Suite benefits from technology that VMware obtained through the acquisition of DynamicOps. The DynamicOps technology landed in the vCloud Automation Center 5.1 release, which was announced in October of 2012.

Eschenbach noted that over the course of 2012 VMware acquired six companies in total, including iTHC, Cetas, Wanova, DynamicOps, Pattern Insight and Nicira. Looking forward into 2013, it is likely that VMware will continue to acquire more companies.

"You will also see us continue M&A activities and strengthen alliances, again, in support of our focused growth priorities of the software-defined datacenter, hybrid cloud and end-user computing," Gelsinger said.

"Our aspirational goal is to become the greatest infrastructure software company of this decade, $10 billion and beyond," Gelsinger continued, "by delivering software innovations that bring agility, efficiency and choice to our customers while simplifying everything about infrastructure and IT."

Layoffs

Though VMware is growing its business, it is also aiming to improve operational efficiency throughout. VMware is planning on eliminating 900 jobs as part of that optimization.

"Some of these will be provisional eliminations associated with streamlining operations and some will result from targeted product actions," Jonathan Chadwick, Chief Financial Officer and Executive Vice President at VMware, said during the call.

While VMware is now announcing workforce reductions, Chadwick emphasized that the overall employee trend at the company in recent years has been positive.

"Now putting this in perspective, VMware has increased its workforce by over 6,700 people over the course of the last three years," Chadwick said. "While these choices are often tough, we know that this is healthy for our business and an important step as we plan for the long term."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.